Scorpio Tankers, Inc. Q4 FY2024 earnings call

• Strong quarter and year financial results: Fourth quarter adjusted EBITDA $105M, full-year 2024 adjusted EBITDA $842M. - Balance sheet strengthening: Reduced indebtedness by $740M, lowered daily cash breakevens, liquidity at $1.3B. - Operational highlights: Completed special surveys and dry docking of 54 vessels in 2024, sold 12 older vessels to improve fleet age profile. - Market outlook: Positive for crude oil and refined products; low leverage, strong liquidity, young fleet position the company well. - Capital allocation: No change to dividend policy, not considering extraordinary dividends or new ship orders, open to share buybacks and small investments in adjacent market companies.

In the fourth quarter, the company generated $105 million in adjusted EBITDA and $30 million in adjusted net income. For the full year 2024, it generated $842 million in adjusted EBITDA and $513 million in adjusted net income. The company significantly strengthened its balance sheet by reducing indebtedness by $740 million, expanding revolving debt capacity, and lowering daily cash breakevens to $12,500 per day. Liquidity stood at $1.3 billion, including $531 million in cash and $788 million in undrawn revolving capacity (excluding investments in DHT).

• Positive outlook for crude oil and refined products markets. - Strong balance sheet, low leverage, and strong liquidity position the company well to thrive under various rate environments. - No immediate plans for new ship orders but open to opportunistic actions like share buybacks and investments in adjacent markets.

• Geopolitical events: Uncertainties from events like tariffs, sanctions, and Red Sea situation can impact trade flows and shipping rates. - Insurance risks: High insurance costs and uncertainties due to ongoing conflicts and events in the Red Sea. - Aging fleet: Older vessels transport less refined product, potentially reducing effective fleet growth even without scrapping.

Q: How have sanctions impacted trade flows, especially in the midsize Aframax LR2 segment?

A: Second round of sanctions hit more ships, causing rerouting, increased storage, and constraints in supply in the segment, but impact on rates is delayed.

Q: How to drive down cash breakevens from current levels?

A: Efficiency of the fleet from dry docked vessels and utilizing revolving credit facilities, paying into them to further reduce breakevens.

Q: Thoughts on investment in DHT and crude market outlook?

A: Expect crude market to break out with sanctions and other factors, DHT is a best-in-class investment with predictable management.

Q: Impact of Red Sea situation on insurance and trade?

A: Insurance market is agnostic but risk price remains high; Red Sea situation has impacted east to west arbitrage flows but refinery turnarounds and new capacity may change this.

Q: Order book and transition between crude and product markets?

A: LR2 new builds are fungible with Aframax vessels, and the order book needs to be considered in conjunction with the aging fleet, with demand for both assets.